GPS Stock Gaps Lower After Rent Deferment

The retailer is suspending roughly $115 million in monthly rent payments

Digital Content Manager
Apr 23, 2020 at 9:26 AM
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Gap Inc (NYSE:GPS) made it clear this morning that it's having a hard time weathering the hard-hitting economic effects of the coronavirus. The retailer said it might not have enough funds to continue operations into the next year, and that cutting costs and raising money by issuing debt would be necessary. Gap also said it suspended roughly $115 million in monthly rent payments in an effort to tighten its purse strings, which in some cases means terminating store leases altogether. At last check, GPS is down 7.2% at $6.64.

This drop puts GPS much closer to its early April all-time low of $5.26. The equity has struggled to rally along with the rest of the market, with descending resistance at the 30-day moving average keeping a tight lid on the shares for the past few weeks. Coming into today, Gap stock had already lost 71.6% for the year. 

It's no surprise the majority of analysts covering Gap are bearish. Twelve consider the security to be a "hold," while the remaining five call it a "sell" or worse. There's plenty of room for price target cuts, however. The consensus 12-month price target of $10.61 is a 57.4% premium to last night's close. 

The options pits have acted in turn, with 3.48 puts picked up for every call in the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 74% of all other readings from the past 12 months, suggesting a healthier-than-usual appetite for long puts of late. 

The stock's Schaeffer's put/call open interest ratio of 3.71, which sits in the 84th percentile of its annual range, looks similar. This suggests short-term options players have rarely been more put-biased in the past year. 


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